Economy

President Barack Obama’s persistence has managed to smoke out House Speaker John Boehner and the Republicans. Their just-announced plan for cutting the deficit is what we suspected: cuts in Medicare and Social Security; no higher tax rates on the rich; limits on tax deductions that would hit the middle class as well as the wealthy, but only raise half the revenue of Obama’s plan; and a lot of fudging with numbers. The Republicans might as well be parading around with a sign that reads “Kick Me.” None of this stuff solves the real problem of getting a recovery going. If you believe that deficit reduction is required, it doesn’t even solve that. And the plan cuts into social insurance programs that are hugely popular, while Obama defends them. Best of all, the corporate deficit hawks marching under the banner “Fix the Debt” are left out in the cold. Nobody is emphasizing austerity as an economic cure. Corporate Democrat Erskine Bowles is yesterday’s news (sit down, please), almost as...

F or three decades, conservative critics have been warning that the elderly are living too well at the expense of the young. Since the early 1980s, financier Peter G. Peterson has been predicting that Social Security’s excessive generosity would crash the retirement system and the economy. The late British journalist Henry Fairlie, in 1988, famously wrote a piece in The New Republic with the cover line “Greedy Geezers,” faulting the elderly for living too well at the expense of the young. (Seymour Chwast) Thanks to the economic boom of the late 1990s, senior bashing went into temporary eclipse. With full employment and rising wages, payroll tax receipts swelled the Social Security trust funds. In the three years between 1997 and 2000, the system’s projected year of reckoning—when it could no longer pay all of its claims—receded by eight years (from 2029 to 2037). At that rate, Social Security would soon be in perpetual surplus. All it took to balance the system’s books was decent wage...

In response to pushback from Congress and progressive activists following a report in Thursday’s Wall Street Journal that Obama had offered to be “flexible” on tax-rate hikes for the very richest, the White House formally unveiled a tough bargaining stance: $1.6 billion in tax increases over a decade, all on the top two brackets, and no tax hikes for the bottom 98 percent. The White House proposal included only $400 billion in spending cuts over a decade, none of which cut into Social Security or Medicare—details to be filled in later. Obama also proposed a change in the law to eliminate the obstructionist ritual of requiring a congressional vote to periodically increase the debt ceiling. (The debt increase has already been obligated by previous congressional actions, so the debt-ceiling vote is entirely redundant and nothing but an opportunity for mischief.) The Republicans, not surprisingly, dismissed the White House position out of hand. Two things are encouraging about Obama’s...

Biltmore House, where the mortgage is probably paid off by now. (Flickr/Steve and Sara Emry)

Something strange has happened in the past few days as we have approached the Austerity Trap (aka "fiscal cliff"). Suddenly, people are actually talking about the possibility of cutting back on the home interest deduction, a "gift," as Mitt Romney might call it, that dwarfs most others the federal government distributes (among tax expenditures, only the deduction for health insurance costs the government more). I continue to believe that there's just no way Congress is going to touch the MID, cherished as it is by so many. But I could be wrong, and this is a good time to brush up on where the deduction came from and what its consequences are. The mortgage interest deduction came about essentially by accident. When the Constitution was amended in 1913 to allow for an income tax, Congress made all interest payments deductible. Mortgage interest wasn't mentioned specifically, and there was no suggestion that this was something necessary to promote home ownership. But as more Americans...

From Burger King to Walmart , the low-wage workers we depend on to staff America’s consumption-driven economy are tired of being overworked and underpaid, and they are letting their bosses know. Early this morning, fast-food workers in New York City went on strike across more than half a dozen chains, including McDonald’s, Burger King, Domino’s, KFC, Taco Bell, Wendy’s and Papa John’s. Backed by community groups like New York Communities for Change , United NY , and the Black Institute , as well as various representatives of religious organizations, fast food workers are asking for a chance to work with dignity in an industry notorious for its fast pace, low wages , and often erratic scheduling. Also notorious for high turnover , fast food workers have historically had a difficult time organizing for better conditions. As reported by Steve Greenhouse at The New York Times : Leaders of the effort said that workers were walking off the job to protest what they said were low wages and...

(AP Photo/Susan Walsh) Invited guests listen as President Barack Obama speaks in the Eisenhower Executive Office Building about extending middle-class tax cuts before they expire in January. The president said he believes that members of both parties can reach a framework on a debt-cutting deal before Christmas. P resident Barack Obama, to his great credit, has drawn a bright line. Taxes have to revert to the rates that were in effect before the Bush tax cuts for the richest 2 percent. This is crucial because the less the very rich pay, the more others have to pay either in the form of less tax relief for the bottom 98 percent or on program cuts like Social Security and Medicare. Or has he drawn that line? Yesterday, the White House put out the word that the president was willing to be “flexible” on the question of tax rates for the top bracket. Specifically, that means the president will accept the Republican idea of getting some of the needed revenue by closing loopholes rather than...

I’m trying to remain optimistic that the president and congressional Democrats will hold their ground over the next month as we approach the so-called “fiscal cliff.” But leading those negotiations for the White House is outgoing Secretary of Treasury Tim Geithner, whom Monday’s Wall Street Journal described as a “pragmatic deal maker” because of “his long relationship with former Treasury Secretary Robert Rubin, for whom balancing the budget was a priority over other Democratic touchstones.” Geithner is indeed a protégé of Bob Rubin, for whom he worked when Rubin was Treasury Secretary in the Clinton administration. Rubin then helped arranged for Geithner to become president of the New York Fed, and then pushed for him to become Obama’s Treasury Secretary. Both Rubin and Geithner are hardworking and decent. But both see the world through the eyes of Wall Street rather than Main Street. I battled Rubin for years in the Clinton administration because of his hawkishness on the budget...

This year's election wasn't the most negative in history, or the most trivial. But it did see a few new developments, including one particularly troubling one: the spread of politics into some places it used to be unwelcome. And not just any politics, but a kind of ill-informed, antagonistic kind of politics, the kind that says that your party losing is literally a national catastrophe and that there is no such thing as an opponent, only an enemy. When we hear ridiculous stories like that of the gun store owner in Arizona who took out an ad in the local paper proclaiming, "If you voted for Barack Obama, your business is NOT WELCOME at Southwest Shooting Authority," we aren't surprised. After all, hundreds of thousands of people—maybe millions—got an extra dose of partisanship at their jobs this year for the first time. When the Supreme Court decided the Citizens United case in 2010, most of the focus was on the fact that the decision allowed corporations and wealthy individuals to...

On Saturday, The Wall Street Journal ran one of its trademark editorials making fun of government red tape—the massive regulations required to implement the Affordable Care Act; the 398 different rulemakings necessary to carry out the Dodd-Frank Act, and a great deal more. I seldom agree with the Journal ’s editorial page, but it makes an unintentional point: Government regulations have become so complex that they can’t do their job. Or at best, the sheer complexity makes the government sitting ducks for the mischief of industry lobbyists looking to further complicate the rules with loopholes. But where does the complexity come from? It comes from the metastasized abuses of the private sector and the success of the business elite in getting government to pass laws with plenty of room for industry to maneuver. The Glass-Steagall Act of 1933, by contrast, was simplicity itself. It ran just a few pages and didn’t need 398 different rulemakings to carry it out. The act provided that you...

A half century ago America’s largest private-sector employer was General Motors, whose full-time workers earned an average hourly wage of around $50, in today’s dollars, including health and pension benefits. Today, America’s largest employer is Wal-Mart, whose average employee earns $8.81 an hour. A third of Wal-Mart’s employees work less than 28 hours per week and don’t qualify for benefits. There are many reasons for the difference—including globalization and technological changes that have shrunk employment in American manufacturing while enlarging it in sectors involving personal services, such as retail. But one reason, closely related to this seismic shift, is the decline of labor unions in the United States. In the 1950s, over a third of private-sector workers belonged to a union. Today fewer than 7 percent do. As a result, the typical American worker no longer has the bargaining clout to get a sizeable share of corporate profits. At the peak of its power and influence in the...

(AP Photo/Evan Vucci) Interior Secretary Ken Salazar, center, accompanied by Senator Jeff Bingaman, right, speaks during a news conference on Capitol Hill in Washington, Thursday, October 1, 2009, to discuss future activities relating to the Navajo-Gallup water supply project. F ive years after the Wampanoag tribe shared a three-day feast of maize, venison, eel, and shellfish with a hapless group of English separatists in Plymouth, Massachusetts, the Dutch governor of New York bought the island of Manhattan from the Canarsie tribe for $24 worth of gold. This week, thousands of New Yorkers will fly out of La Guardia for Thanksgiving, and those fortunate enough to do so in the evening will enjoy a spectacular view of the return on that investment; phosphorescent skyscrapers and over a hundred-thousand streetlights trace a real-estate market valued at just under $1 trillion. Nowhere else has the memory of conquest been so thoroughly blotted out, and perhaps as an extension, nowhere else...

I wish President Obama and the Democrats would explain to the nation that the federal budget deficit isn’t the nation’s major economic problem and deficit reduction shouldn’t be our major goal. Our problem is lack of good jobs and sufficient growth, and our goal must be to revive both. Deficit reduction leads us in the opposite direction—away from jobs and growth. The reason the “fiscal cliff” is dangerous (and, yes, I know—it’s not really a “cliff” but more like a hill) is because it’s too much deficit reduction, too quickly. It would suck too much demand out of the economy. But more jobs and growth will help reduce the deficit. With more jobs and faster growth, the deficit will shrink as a proportion of the overall economy. Recall the 1990s when the Clinton administration balanced the budget ahead of the schedule it had set with Congress because of faster job growth than anyone expected—bringing in more tax revenues than anyone had forecast. Europe offers the same lesson in reverse...

Jesse Lenz W hen Joe Parker was a young, newly married public-school administrator who wanted to buy a home in 1974, he didn’t even think about leaving Prince George’s County, Maryland. It was where he and his parents had grown up. But when Parker first tried to bid on a house in a new development in Mitchellville, a small farming community that was sprouting ranch and split-level homes on old plantation lands, the real-estate agent demurred, claiming there were other buyers. In truth, the development had been built to lure white, middle-class families to the county, which sits just east of Washington, D.C. Parker never told the agent that he served on a new county commission to enforce laws forbidding housing discrimination. He just persisted, he says, until he and his wife were able to bid. “My wife kept saying, ‘Why don’t you tell him?’” Parker recalls, but he refused to pull rank. “I said no, because what does the next black man do?” The next black families did arrive. Throughout...

You remember the Twinkie Defense? It was a term of ridicule coined by reporters covering the 1979 San Francisco murder trial of county supervisor Dan White. The right-wing White had assassinated both fellow supervisor Harvey Milk, a heroic figure in San Francisco’s gay community, and Mayor George Moscone. Lawyers for White claimed that he overdosed on Twinkies, and was acting under the delusional influence of a sugar high. Now, there is a new Twinkie Defense, and it is equally shameless and delusional. The Twinkie Defense is: the unions made us do it. For those who missed it, having perhaps spent the weekend on Jupiter, the iconic Twinkie brand is on the verge of extinction. The parent company of America’s beloved junk food, Hostess Brands, has been in bankruptcy since January 2012. In the bankruptcy proceeding, management has been leaning on the unions to go along with massive pay and benefit cuts to “save the company.” The bakers’ union, the largest at Hostess, voted by a 92-percent...

(AP Photo/Susan Walsh) A copy of H.R. 3200, America Affordable Health Choices Act of 2009, sits on the desk of House Energy and Commerce Committee Chairman Henry Waxman, a Democrat from California. A s The Washington Post ’s Ezra Klein declared shortly after voters re-elected President Barack Obama, one of the major winners last week was health-care reform. With Democrats holding on to the Senate and the White House, Republicans will be unable to repeal the law before all of its provisions go into effect in 2014—after which, the theory goes, the public will come to accept that government has the responsibility to ensure health care is available for all. This is the end of a long battle for progressives: Health care has been the major missing piece of our welfare state for nearly a century, and for decades making it part of our system of social insurance has been a primary goal of politicians, think tanks, and activists. With this piece of the progressive puzzle in place, the natural...